Retrospective GST input tax credit amendment and premature recovery barred before statutory payment period expires

Retrospective insertion of section 16(5) of the CGST/BGST Acts required the appellate authority to reconsider rejection of input tax credit, because the amended provision extended the time to avail credit on invoices or debit notes for FY 2017-18 to 2020-21 in returns filed up to 30 November 2021. An order based only on section 16(4) could not stand without applying the amended legal position, so the credit issue was remanded for fresh consideration. Recovery under sections 78 and 79 could not be initiated before expiry of the statutory waiting period for payment, as section 79 operates only after the amount becomes recoverable under section 78. Premature recovery was therefore illegal and the recovered amount had to be refunded with interest.

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Issues: (i) Whether the appellate order rejecting input tax credit required reconsideration in view of the retrospective insertion of sub-section (5) in section 16 of the CGST Act and BGST Act; (ii) Whether recovery of the tax demand could be effected before the expiry of the statutory period prescribed under sections 78 and 79 of the CGST Act and BGST Act.

Issue (i): Whether the appellate order rejecting input tax credit required reconsideration in view of the retrospective insertion of sub-section (5) in section 16 of the CGST Act and BGST Act.

Analysis: The retrospective insertion of section 16(5) extended the time for availing input tax credit in respect of invoices or debit notes pertaining to the financial years 2017-18 to 2020-21, permitting credit in returns filed up to 30 November 2021. The appellate authority had not had occasion to consider this provision because it was inserted after the impugned order. The earlier rejection of the claim based solely on section 16(4) therefore could not stand without fresh consideration of the amended legal position.

Conclusion: The appellate order on input tax credit was set aside and the matter was remanded for fresh consideration, in favour of the assessee.

Issue (ii): Whether recovery of the tax demand could be effected before the expiry of the statutory period prescribed under sections 78 and 79 of the CGST Act and BGST Act.

Analysis: Section 78 grants three months from the date of service of the order for payment before recovery proceedings may begin, unless a shorter period is specifically fixed for recorded reasons. Section 79 provides the modes of recovery but operates after the amount has become recoverable in accordance with section 78. A conjoint reading of the two provisions shows that garnishee or other recovery modes cannot be invoked before the statutory waiting period expires. The recovery from the petitioner's bill was made within that protected period and without adherence to the statutory preconditions.

Conclusion: The recovery was held illegal and the amount recovered was directed to be refunded with interest, in favour of the assessee.

Final Conclusion: The writ petition succeeded to the extent that the appellate rejection was set aside for reconsideration and the premature recovery was invalidated, with consequential refund and interest directions.

Ratio Decidendi: A retrospective amendment enlarging the time to avail input tax credit must be applied by the appellate authority on fresh consideration, and recovery under the GST law cannot be initiated before the expiry of the statutory period for payment because the recovery machinery under section 79 operates only after liability becomes recoverable under section 78.

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